Make your advertising accountable with ?pay for performance?

The whole premise of pay-for-performance advertising is that you actually know what parts of your advertising are working. Even better, you only pay for it if it delivers.

September 20, 2010

Chances are, you’ve heard the old joke about advertising only working half of the time. The problem is that you never know which half.

The whole premise of pay-for-performance advertising is that you actually know what parts of your advertising are working. Even better, you only pay for it if it delivers. Most people tend to think of it just in terms of online advertising -- pay-per-click (PPC) campaigns fall under the umbrella of pay-for-performance advertising -- but in today’s market, it can easily extend into other media as well.

Advertising revenues for all major media have been falling with the exception of Internet advertising, says Walt Denny, principal of Walt Denny, Inc., a Hinsdale, Ill.-based public relations firm that specializes in working with home products companies.

Internet advertising is based on delivering tangible results that’s very trackable; that situation is putting pressure on traditional media to rise rise up and meet that criteria. “Contractors can probably sit down with their ad reps and work out deals,” he says. “A lot of them will find traditional media is willing to do that.”

Bob Birner, vice president of Amazing Siding Corp. and Renewal by Andersen in Tomball (Houston), Texas, leveraged his position as a regular advertiser spending $10,000 a month to negotiate pay-for-performance ads with various media, including radio stations, a newspaper and even a billboard company.

“We’ve been pretty aggressive trying different types of advertising sources,” Birner says. “A few years back when the economy was more robust, there wasn’t the receptiveness to these types of suggestions. Now they have taken a hit and they’re more receptive to it. Newspapers have been most receptive.”

Birner commits to the minimum monthly spend of $10,000, but it has to generate $100,000 worth of business for him. Anything above that earns them 10 percent of the gross sales that can be tracked to the media. “If it performed, it worked out well for all parties,” he says.

He knows which ads are generating revenue because he uses a company that offers a separate phone number and a unique URL for each advertising source, allowing him to have “irrefutable tracking. We don’t even have to ask where the source came from,” he says. “We know where they came from.” His pay-for-performance deals have worked well in some instances, and not so well in others. It’s been tweaked over the months. The newspaper has been happy to continue the arrangement, but the billboard company has pulled out because the arrangement proved too lopsided toward Amazing Siding.

“Everyone’s lived up to their end of the agreement,” he notes. “We haven’t gotten it down to an exact science. The point is that there’s a dialog between us. We don’t want a situation that’s great for us and horrible for them -- that’s not going to work.”

To make these kinds of arrangements viable, he says, requires “the right people to be open to out-of-the-box thinking” and contractors who are large enough -- Birner estimates at least $1 million per year in sales for a replacement contractor with a 10 percent marketing budget -- to make the arrangement worthwhile for the ad providers. “Most design/build companies have 1-2 percent of annual sales as their marketing budget,” he notes. “My marketing budget of 10 percent won’t work for them.”

Another option is talking to a local television station about producing an infomercial, with payment based on the contracts it generates.

“I think they’d find some television stations would be open to doing that kind of advertising,” Denny says.

Other contractors have had good results from online pay-for-performance advertising. Joaquin Erazo, senior vice president for marketing and public relations at Bethesda, Md.-based Case Design/Remodeling, says that by combining pay-per-click advertising with search engine optimization and social media, the Web is his second-largest source of qualified leads.

“Our pay-per-click campaign has been great,” he says. “We own page 1 on Google and Google Maps.”

He points out, though, that getting on the first page of Google results won’t generate sales if no knows who you are. “You have to do branding,” he says. “I do trucks, yard signs, events — we’re everywhere.”

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